Agriculture: Role In A Nation's Economic Growth.
Agriculture as a whole has been usually perceived to be majorly a source of food supply and employment. For the full details, you can take a quick read on the socioeconomic importance of Agriculture to a nation. Subsequently, it is important to discuss the economic roles of the agricultural sector of a nation.
Infrastructure Development
Agriculture expansion necessitates the construction of roads, market yards, storage, transit trains, postal services, and other social amenities that generates demand for industrial products and the growth of the commercial sector. Irrigation, transportation, electric power, and agricultural markets have received the majority of agricultural infrastructure investment. However, following the World Bank Report (1994), the definition of agricultural infrastructure was narrowed to include long-lasting engineered facilities and other services such as roads, electricity, and telecommunication. ECOWAS countries have made strides in infrastructure development over the last decade. According to AFDB (2016), growth in the ICT sector is closely followed by growth in the transportation sector. Several studies have been conducted to investigate the impact of infrastructure development on agricultural output and agricultural employment, with varying results. Findings of these studies show a great level of improvement in agricultural output with good infrastructures like road, electricity, markets, etc. hence the rapid development of infrastructure to boost agricultural production.
Raw Material Supply
The agricultural sector supplies input for the other sectors of the economy. Agro-allied industries such as flour mills, textiles, and clothing, confectionery/snack making, etc make use of agricultural produce in the manufacture of semi/finished products. In some cases, agricultural waste serves as an important input for certain industries such as biofuel production.
Agricultural progress is required to improve the supply of raw materials for agro-based industries, particularly in developing countries. The scarcity of agricultural goods has an impact on industrial production, increasing the general price level. It will stifle the country's economic growth.
Income and/or Revenue:
Agriculture can also be a major source of savings or capital for developing countries' industrial growth. Even in poor developing countries, where agricultural income is unequally distributed, rural people with high incomes can save for industrial development. The sale of agricultural produce, processed and unprocessed gives income or revenue to the farmers and other stakeholders on the Agri-biz value chain. Furthermore, small farmers can deposit their small savings in rural banks, and these banks can then lend to industrialists for investment purposes. The international trade of this product as raw materials or finished products generates national revenue for the country. By taxing the agricultural sector, the government can also extract savings from farmers.
Foreign Exchange
The exportation of agricultural produce to other countries in demand for the products in large quantities gives room for the exchange of currencies. It is of greater benefit if the currency of the buying country has a higher value on the international market. This aids the supplier country to make her international transactions without having to incur expenses attached to exchange rates of a lower currency. The continuous supply of agro-produce guarantees the source of foreign exchange. Important agricultural products exported in many African countries are Cocoa, Groundnut, Palm Oil, Fish and Fish products, Cotton, and so on. In the early stages of economic development, developing countries frequently face a lack of foreign exchange, referred to as a "foreign exchange gap," to meet the import requirements for industrial development. By contributing to foreign exchange earnings, developing countries gain access to imported goods required for industrial growth that cannot be produced at home or have a higher opportunity cost.
Gross Domestic Product (GDP)
Agricultural supply for the food industry and others contributes to the national and global gross domestic product. According to the world bank in 2018, agriculture accounted for about 4% of global gross domestic product (GDP) and it also accounted for up to 25% of the GDP for some developing countries. Oftentimes, agriculture takes a top position amongst sectors of the economy contributing high monetary value to the nation`s income from its products. The production rate significantly affects this value of contribution hence the vulnerability of the GDP on agricultural produce in some societies.
Conclusively, agriculture is a multifaceted entity with a myriad of roles by which it contributes to a Nation's economy. Agriculture is pivotal to the development and advancement of a Nation. The output rate significantly constitutes the wealth of the country in terms of GDP, revenue, and foreign exchange.
© Food and Agricultural Technology Unit -PARG 2021.
Edition 1, Volume 1, Article 4
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